Sale of inherited property before 1994: application of the transitional regime

The taxation of the sale of real estate acquired through inheritance raises frequent doubts, especially when the acquisition occurred decades ago. The Dirección General de Tributos (DGT) has clarified the tax treatment applicable to the capital gain or loss derived from the transfer of a home inherited in 1968.

What the DGT has resolved

The inquiry focuses on determining the acquisition value and applying tax benefits for assets acquired before the current regulations came into force. The criteria establish that the capital gain or loss is calculated by the difference between the transfer value and the acquisition value.

In the case of inherited assets, the acquisition value must be the value of full ownership resulting from the Inheritance and Gift Tax (ISD), to which expenses and investments made must be added. As it concerns an asset acquired before 1994, it is possible to apply the reduction provided for in the ninth transitional provision of the Personal Income Tax Law (LIRPF), provided that the transfer value limits established in the regulation are respected.

What it means for you

If you are the owner of a home received through inheritance prior to 1995, the regulations allow you to access a reduction regime that can decrease the tax burden of the transaction. It is fundamental to correctly determine the acquisition value, integrating not only the value declared in the inheritance tax but also the expenses associated with said acquisition.

This scenario directly affects individuals who carry out the sale of this type of real estate, as the calculation of the taxable base will depend strictly on the correct application of these values and the limits set by law for assets acquired in periods prior to the 1994 reform.

What you should do

Given an operation of this nature, it is necessary to perform a detailed analysis of the inheritance documentation and the expenses that can be integrated into the acquisition value. It is recommended to:

• Verify the value of full ownership declared in the Inheritance and Gift Tax (ISD).
• Collect all supporting documents for expenses and investments made on the property.
• Check that the requirements of the ninth transitional provision of the LIRPF are met to apply the reduction.
• Assess each particular situation to ensure that the calculation of the capital gain is correct.